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Technology Stocks : Worst stocks for '96
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To: Michael Hillman who wrote (95)1/17/1996 2:07:00 PM
From: Peter Hsu   of 312
 
Playing the Netscape game is like playing the Airplane Investment (Chain mail game) game. Everyone knows the plane will eventually crash, they're just unwilling to believe that they'll be piloting it when it crashes. Why is NSCP bound to crash? Let's look at why it's flying so high: limited supply of stock, huge demand. Why is it bound to crash? 1) NSCP will issue new equity to capitalize on the inflated price (they'd be idiots if they didn't) and then set in motion the equalization between supply and demand 2) People will realize that NSCP's market segment doesn't have MSFT's monopolistic or competition killing leverage 3) as revenues continue to grow, margins will eventually decline due to price sensitive unconstrained competition and 4) initial investors will start to cash out. When it happens, no one will know, but when it happens, one thousand investors will want to cash in their profits at the same time and their will be no market whatsoever for thier action. The plane will crash and whoever on board will not have a parachute.
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